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2019 (1) TMI 371 - AT - Central ExciseArea Based exemption - Units in Kutch District of Gujarat - further investments which resulted in the addition - goods manufactured on such plant and machineries that were installed after cut-off date 31.012.2005 - expansion of the unit after cut-off date 31.12.2005 - restriction on exemption benefit - extended period of limitation - benefit of N//N. 39/2001-CE dated 31.07.2001 (as Amended from time to time). Held that - From the details of machineries installed after 31.12.2005 and process flow chart, it is clear that the machines were used for intermediate process of the final product i.e. made-ups articles namely, Terry Towels and Bed Sheets. It is also observed that there is no addition to enhance capacity of final product i.e. bed sheets and terry towels - The said machine had capacity to cut and hem 63 MT terry towel per day, the Gerber make machine installed in the plant make can lay 75000 bed sheet per day. The appellant did not make any further additions in the said department post 31.12.2005. It is observed that in the bed sheet sewing department, 266 manually operated sewing machines were installed prior to 31.12.2005 and 132 machine post that period. In respect of said two prodcuts, the same can be converted into terry towels and bed sheets respectively in the cutting department at this stage the finished goods take shape and emerge. It is undisputed that post 31.12.2005, the appellant did not install any new machine in the cutting department. As regard adding of sewing machines in the bed sheet sewing department, it did not make the production thereof, since the capacity of production is determined at cutting stage, wherein the machines installed have a rated capacity - The capacity of the production of bed sheets cannot be linked to the sewing machines thus the installed capacity for manufacture of made-ups which is directly linked to the respective cutting machines has not undergone any change - thus, the appellant fulfilled all the conditions stipulated in the Notification No. 39/2001-CE (Supra) and therefore, have rightly entitled for the refund of Central Excise duty paid in their PLA for the disputed period. If the observation of the department is considered that the appellant have made further investment in the plant and machinery after 31.12.2005, but as per the facts discussed above regarding details of machinery installed after 31.12.2005 it is found that all those machines were installed at intermediate stage whereas no addition was made at the stage of manufacture of final product, therefore, the production capacity of final product does not get affected or enhanced due to installation of machinery for the intermediate process - It is an admitted fact that the appellant were buying the intermediate goods from the outsiders. Even in that case, the final product manufactured out of the bought out intermediate goods were entitled for notification 39/2001-CE and the same has been allowed without any dispute by the department, therefore, there is no difference that whether the appellant manufactured final product out of bought out goods or from the goods manufactured in the appellant s plant and machinery procured after 31.12.2005. In both cases, the exemption is available to the entire quantity of the final production produced and sold without any value cap or quantity cap. The intention of the notification is very clear that if the initial civil work and installation of the Plant and machinery is completed and commercial production in such unit started before 31.12.2005, the exemption for 5 years irrespective of any of the amount of value or quantity is available. It is clear that since assessee is required to make the declaration wherein a product on which the exemption is entitled to be availed must be declared. Any new product manufactured after 31.12.2005 shall not be eligible for exemption - In the facts of the present case, the appellant right from the beginning declared the final product i.e. bed sheets and terry towels they have not started production of any new product after 31.12.2005, therefore, as per the clarification of the Board given hereinabove the appellant cannot be denied the exemption on the product declared and the same were being manufactured throughout the period of exemption. It is clear that irrespective of any addition or modification in the plant and machinery since the notification did not place a bar or restriction on such addition /modification, the exemption shall be available in 10 years as per the above referred notification - since the appellant have strictly followed the conditions of the notification no 39/2001-CE particularly completion of civil work and plant and machinery and commencement of commercial production before 31.12.2005, the exemption for 5 years is available. Time limitation - Held that - Since we decide the case in favour of the assesse on merit itself we are not going to address the issue of limitation. The appellant is entitled for the exemption under Notification 39/2001-CE despite the fact that the appellant have installed additional machineries for manufacture at intermediary stage as the overall capacity of final product does not increase - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the appellant has rightly claimed benefit of Exemption Notification No. 39/2001-CE dated 31.07.2001 (as Amended from time to time) in respect of goods manufactured on plant and machineries installed after the cut-off date 31.12.2005? 2. Whether the expansion of the unit after the cut-off date 31.12.2005 restricts the appellant from availing the benefit of Exemption Notification No. 39/2001-CE? 3. Whether the larger period of limitation is invokable in the facts of the present case? Detailed Analysis: 1. Claiming Benefit of Exemption Notification No. 39/2001-CE: The appellant, engaged in manufacturing excisable goods, claimed exemption under Notification No. 39/2001-CE, which was intended to encourage industrialization in the Kutch region post the 2001 earthquake. The exemption required the unit to be set up before 31.12.2005 with an investment of over ?20 crore in plant and machinery. The appellant commenced production on 14.01.2005 with an investment of ?170.31 crore, later increased to ?465.68 crore by 31.12.2005. The department contested the appellant's claim, arguing that additional machinery installed after 31.12.2005 disqualified them from the exemption. However, the Tribunal found that the additional machinery was for intermediate processes and did not increase the final product's capacity. The Tribunal concluded that the appellant met the exemption conditions and was entitled to the benefit. 2. Expansion of the Unit Post Cut-off Date: The Tribunal examined whether the expansion of the unit after 31.12.2005 restricted the appellant from availing the exemption. The exemption notification did not explicitly restrict post-cut-off investments. The Tribunal noted that the appellant's additional investments were for intermediate processes and did not enhance the final product's capacity. The Tribunal emphasized that the notification's objective was to promote industrialization and that restricting further investments would contradict this goal. The Tribunal referenced Board Circular No. 110/21/2006-CX, which clarified that new products introduced after the cut-off date would not qualify for exemption, but products declared and manufactured before the cut-off date would remain eligible. The Tribunal concluded that the appellant's additional investments did not disqualify them from the exemption. 3. Larger Period of Limitation: The Tribunal did not address the issue of the larger period of limitation, as the case was decided in favor of the appellant on merits. Conclusion: The Tribunal held that the appellant was entitled to the exemption under Notification No. 39/2001-CE despite installing additional machinery for intermediate processes, as the overall capacity of the final product did not increase. The appeal was allowed with consequential relief. The Tribunal emphasized that the notification's objective was to promote industrialization and that restricting further investments would contradict this goal. The Tribunal referenced relevant judgments and Board Circulars to support its decision. The Tribunal did not address the issue of the larger period of limitation, as the case was decided in favor of the appellant on merits.
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